Options Trading News

April 23, 2013  Tue 9:26 AM CT

Kimberly-Clark is trading at all-time highs, and one investor is betting on more gains ahead.

optionMONSTER's Heat Seeker system detected the sale of 3,000 May 105 calls for $2.40 and the purchase of 3,000 June 110 calls for $1.40. Volume was below previous open interest in the May strike but above it in the June contracts, indicating that a long position was closed and rolled forward.

The move allows the investor to stay in the trade for another month while likely taking some profits off the table after the stock's big gains. The new long calls, which lock in the purchase price for the shares, show that the trader remains bullish because he or she is raising the strike price by $5. (See our Education section)

KMB is up another 0.4 percent by $106.01 this morning after hitting a lifetime high of $106.54 at the end of last week. The personal-care products company gapped higher from the $101 level on Friday after beating quarterly estimates and raising guidance.

Many investors have turned to consumer staples as alternatives to low-yielding Treasuries, looking for names that are relatively safe and pay dividends. The group is up more than 27 percent in the last 12 months, according to our proprietary researchLAB service, as shown in the screenshot below.

Less than an hour into the trading day, KMB's total option volume of 11,300 contracts already exceeds its full-session average.

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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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